China is arm-twisting Bangladesh to convert soft loans it offered -during PresidentXi Jinping’s visit to Dhaka last year -to commercial credit (incurring higher interest rates) with apparently no headway into projects for which the amount was earmarked.
It has been learnt that the Chinese proposal was made by Li Guangjun, economic and commercial counsellor at the Chinese Embassy in Dhaka, during a recent meeting of the Sino-Bangladesh Joint Economic Council. However, China later showed signs of softening its stance in the face of Opposition from Bangladesh, according to Dhaka-based persons familiar with the issue. Converting soft loans into commercial credit means Bangladesh will have to pay higher interest for the loan amount, Bangladesh officials told ET from Dhaka over phone.
Compared to the Chinese approach India’s support of $ 7.5 billion Line of Credit for slew of development projects are offered at a concessional rates. Interest rates of India’s Line of Credit to the neighbouring countries are as low as one per cent or even less in some cases. China told Bangladesh that it a detailed list outlining how much of the $25 billion for 34 projects would be treated as soft loans, how much as commercial credit and how much to be contributed by the Bangladesh government.